German truck and diesel engine maker MAN AG has said a five-year old bribery scandal has now cost the company €250 million ($344 million) in fines and penalties and investigation costs.

The company made the disclosure in the proxy materials for its annual general meeting of shareholders. It said the costs now exceed its earlier estimates by €30 million ($41 million).

On December 10, 2009, the public prosecution and the Regional Court I in Munich imposed fines of €75.3 million ($103 million) each on MAN Nutzfahrzeuge AG and former MAN Turbo AG (now MAN Diesel & Turbo SE) for bribes paid inside and outside of Germany between 2002 and 2009. Both are subsidiaries of German truck maker MAN SE (majority-owned by Volkswagon AG since 2013).

MAN said it paid €150.6 million ($207 million) in disgorgement and fines and the costs of external advisors and internal investigations in the amount of €30.2 million ($41 million).

Other costs included the subsequent payment of €20 million ($27 million) for taxes due to the non-deductibility of the bribes and the payment of €50 million ($69 million) for the actual bribes.

The accusations of bribery also led to investigations by public prosecutors in Munich against former executive board members. The proceedings against former CEO Håkan Samuelsson, who is now CEO of Volvo Cars, were terminated with no formal accusation under the condition of the payment of €500,000 ($690,000) to charity.

And Anton Weinmann was found guilty of aiding and abetting bribery in the course of trade by the Munich District Court. He was given a 10-month suspended sentence and fined €100,000 ($138,000).

Separate proceedings against Karlheinz Hornung were closed without conditions due to lack of evidence.

MAN SE and the three former members of the executive board reached individual agreements to settle the company’s claims for damages in exchange for personal financial contributions of €1.25 million / $1.7 million (Samuelsson), €1 million / $1.38 million (Weinmann), and €800,000 / $1.1 million (Hornung).

The former executive board members belonged to the group of persons covered by a directors and officers liability insurance policy (D&O). After intensive negotiations, the D&O insurers agreed to pay €42.5 million ($58.6 million) to settle damages resulting from the bribery cases. Both the individual and the D&O settlement agreements are subject to approval of the general shareholders’ meeting on May 15, 2014.

The agreements don't relate to any claims for damages from the bribery scandal involving Ferrostaal AG, a former MAN subsidiary. Ferrostaal paid a fine of €149 million ($205 million) for bribes in connection with the sale of submarine to Greece. In early 2009, Abu Dhabi’s International Petroleum Investment Company (IPIC) had agree to buy 70% of Ferrostaal from MAN for €450 million ($620 million). The bribery case, which started shortly after the sale was agreed, led to rescission of the acquisition agreement.

Given the assessment of damage presented by MAN SE, former U.S. Deputy Attorney General Paul McNulty’s statement “If you think compliance is expensive, try noncompliance,” once again proves to be true.

Paying bribes to secure contracts poses high financial risks to the company. Once the bribery has been revealed, it is not done with the disgorgement of ill-gotten profits and paying the fines. Conducting internal investigations, commissioning external advisors, and paying tax arrears will, among things, increase the financial loss companies are exposed to in foreign bribery enforcement matters.

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Claudia Letzien holds a law degree from Humboldt University Berlin Law School (Germany) and is a fully qualified lawyer. She is presently working on a doctoral dissertation about current challenges of transnational bribery and was a Visiting Scholar at George Washington University Law School in Washington D.C. She can be contacted here.